Japan’s regulators are hesitating to approve cryptocurrency-based exchange-traded funds (ETFs), even as global markets embrace spot crypto ETFs.

Despite growing calls from domestic advocacy groups and partnerships forming to launch digital asset products, Japan’s tax and regulatory stance continues to present hurdles to adoption.

Mario Nawfal, entrepreneur and host of “The Roundtable Show” on X, described Japan’s approach to crypto ETFs as “still in HODL mode.”

Japan slow to approve crypto ETFs, maintains strict tax, regulations image 0

Source: Mario Nawfal’s Roundtable

Related: Japan’s Metaplanet makes $7M Bitcoin buy, bringing holdings to $40.5M

Global market shifts

The United States and Hong Kong have already approved spot Bitcoin ( BTC ) and Ether ( ETF ) ETFs, demonstrating a growing willingness to incorporate crypto into traditional finance (TradFi).

This shift is evident in institutional and retail investment in new crypto ETF products, as seen on Oct. 22, when investors poured $329 million into BlackRock’s iShares Bitcoin Trust.

The US Securities and Exchange Commission (SEC) gave spot BTC ETFs the green light in January, followed by Ether ETFs in July, while Hong Kong authorities approved both in April.

However, Japan’s Ministry of Finance and its Financial Services Agency (FSA) have remained cautious about the volatility and risks associated with crypto ETF products.

Related: Japan political party leader promises crypto tax cuts if elected

Tax and regulatory concerns 

Japan’s tax policy is a central issue, as profits from general crypto investments are treated as miscellaneous income and are subject to a tax rate of up to 55%.

This disparity remains a mainstream concern compared to the country’s taxation of traditional ETFs, which are subject to a lower capital gains tax rate of around 20%.

On Oct. 20, the leader of Japan’s Democratic Party for the People, Yuichiro Tamaki, proposed that voters should support his party if they think “crypto assets should be taxed separately at 20%.”  

In an X post, Tamaki stated there would be “no tax when exchanging crypto assets with other crypto assets” and  explained  that the party wants to make Japan “a strong nation” in Web3.

Related: Aptos Labs enters Japan through HashPalette acquisition

Japan still bullish on Bitcoin

Japanese firms continue accumulating crypto assets despite the country’s ongoing regulatory and taxation concerns.

Japanese investment company Metaplanet purchased a further 108.78 BTC worth around $6.92 million on Oct. 7, bringing the Tokyo-listed firm’s total holdings to almost 640 BTC.

Dubbed “Asia’ MicroStrategy,” Metaplanet has been aggressively acquiring BTC and, according to its latest notice, held 639.5 BTC worth around $40.5 million. 

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